Damned If You Do, Damned If You Don’t

June 18, 2011 --


In 2010, the US gave over $14 billion in economic, military, and humanitarian assistance to Afghanistan–a country where total GDP was around $27 billion. This represents not only a significant expenditure on the part of the US, which already spends billions in military expenditure, but a huge chunk of Afghanistan’s GDP; roughly half. However, that does not include other donors, and when their aid totals are counted in the Afghani GDP, Afghan reliance on foreign aid becomes staggering. Recently, a report released by the US Senate stated that 97% of Afghanistan’s GDP comes from foreign aid. That’s a huge number. So, of the $27 billion that is spent in Afghanistan each year through government expenditure, investment, consumption, and exports (minus imports), less than $1 billion is produced by the Afghanis themselves, a number comparable to the economies of Samoa or Monaco. The only caveat is that Afghanistan has about 150 times as many people as Samoa and about 1,000 times as many people as Monaco.

As these are official statistics, the rampant opium trade is not taken into account and neither are unofficial transactions, which would undoubtedly raise GDP by several billion US dollars. Still, the ability of the Afghan government to manage their own resources is seriously called into question by the fact that it only controls a tiny fraction of their own production. Afghanistan still ranks near the bottom (if not dead last) in many development indicators and still has poor infrastructure, a weak military (as controlled by the central government), and a corrupt government. The ability to effectively manage large sums of money is doubtful, as a 2010 scandal at the Kabul Bank involving almost $1 billion revealed. Whatever the progress that has been made in the last several years—GDP for example grew by 8% last year—the country is obviously far from being close to functional on its own.

This combination—the weak central government and over reliance on foreign aid—is especially significant in light of the proposed US withdrawal from Afghanistan by 2014. Particularly, the report estimates that Kabul needs $6-8 billion simply to maintain the military, which faces its own share of copious troubles such as illiteracy, desertion, low morale, and poor training. Reliance on the Afghan Army because of a US withdrawal would be probably force the US to increase aid to avoid a collapse of the military power of the Afghan government. Simply put, if the US is to stay engaged in Afghanistan and work for only a stable government (as opposed to liberal, Western-style democracy), the US taxpayer commitment to the Afghanistan war is not going to end in 2014, whether US troops are stationed in Afghanistan or not. In the event of a complete withdrawal, military advisors would probably not leave the country, the Afghan military would still need training and equipment, and infrastructure and government services would need massive amounts of investment. Of course, the costs–already estimated at $299 billion since the beginning of the war—would be greater if the US retains a military presence. This all begs the question: is it worth it?

To answer that question, you need to understand the value of the benefits of a continued US engagement in Afghanistan. In this article, I am only looking at costs and only from a financial perspective. I simply wish to bring into perspective the cost of involvement in one of the world’s most failed states, especially in light of the newly released Senate report. We need to seriously evaluate the scope of our involvement in Afghanistan and bring the potential benefits of continued engagement in line with the astoundingly high costs. I recognize that there are no easy options here: either we give up on Afghanistan and bring about the potential return of a terrorist safe haven in central Asia, or we bear the costs of billions more dollars and further deaths in a risky effort to prevent such a return. Opinions vary widely as to  the benefits of staying committed there, but to justify it, we need to make sure that the benefits outweigh the costs, including financially.

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